SA has a tendency to miss out on commodities booms. This time it is Transnet Freight Rail in particular which is the killjoy of the commodities party.
As Exxaro Resources, one of SA’s largest coal producers, noted this week, chronic issues on the Transnet coal line to Richards Bay are likely to affect some 2-million tonnes of its exports this year. Despite Transnet’s efforts in recent months to resolve its issues, Exxaro says it has seen little to no improvement.
It’s a hard blow for an industry which is in decline and which suffered through low coal export prices last year, only to now be rendered unable to take full advantage of booming export coal prices. But it’s not just the coal line.
There are problems across the rail network affecting exports from iron ore to agricultural products. While SA’s coffers are overflowing thanks to handsome exports earnings, it could have been better if the rail network was up to par. With Exxaro alone likely to miss out on at least R2bn in export revenues, the opportunity cost is enormous.
Transnet is working furiously to resolve the multiple issues. While it is likely to overcome its operational capacity, how it will arrest the growing issue of copper theft on its lines remains unclear.
Cable theft derails 30% of rail operations every week, Transnet says. As the unemployment rate peaks at 32.6% and SA remains one of the most unequal countries in the world, the rail line is now where the country’s vast mineral wealth and deep poverty meet. Their fortunes are inextricably intertwined.
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